The recent NAR settlement has stirred significant concerns in the real estate community, particularly about the future of the Buyer Agent Commission (BAC). Many fear that sellers may refuse to cover this commission, potentially shifting the cost to buyers and increasing their closing expenses. However, this scenario is unlikely due to the fundamental dynamics of real estate transactions. Let’s delve into why.

The Essential Role of Buyer Agents

A key fact is that 89% of home buyers rely on a buyer agent when purchasing a property. Buyer agents offer crucial services, from guiding clients through the complexities of home buying to securing favorable deals. Most buyers highly value their buyer agent’s expertise, making it improbable that this preference will change. While there’s a possibility that buyers could be asked to pay their agent directly, it’s more likely that the current practice—where sellers cover the BAC—will prevail.

Understanding BAC and Cooperative Compensation

For decades, it’s been standard for sellers to pay the BAC. Some argue this was driven by cooperative compensation agreements included in MLS listings, now largely discontinued. Despite this, the idea that cooperative compensation was the main driver is debatable. Sellers have traditionally paid the BAC for two primary reasons:

1. Sellers Prioritize Net Proceeds and Terms: Sellers focus on their net proceeds and contract terms. As long as these are favorable, they typically don’t mind who pays what. Sellers have long accepted costs that benefit the buyer, like title policies and home warranties, as long as their net gain meets expectations.
2. Buyers’ Cash Sensitivity: Buyers often have limited cash for closing, and additional upfront costs can affect their purchasing power. By covering the BAC, sellers make it easier for buyers to offer stronger bids, facilitating smoother transactions.

Market Standards Are Unlikely to Shift

While some sellers might question paying the BAC, the long-standing market standard is unlikely to change. The structure of real estate deals is deeply ingrained, and sellers will continue to focus on their bottom line, while buyers will prefer offers where the BAC is covered.

Early Insights from Austin, TX

Our firm in Austin, TX, has been navigating these changes since they took effect on August 13. With over two weeks of experience and 100 active agents, we’ve observed that most sellers haven’t objected to covering the BAC. In the few cases where sellers focused on the BAC, we successfully negotiated solutions that worked for both parties, with sellers covering at least 80% of the BAC.

Moving Forward: Education and Negotiation

As the real estate industry adapts to these new rules, education and clear communication with clients are crucial. Sellers should understand that most offers will likely include a seller-paid BAC, while buyers will continue to benefit from reduced closing costs.

Though the NAR settlement has introduced some uncertainty, the fundamentals of real estate remain the same: sellers care about their bottom line, buyers are sensitive to cash requirements, and the structure of most deals will continue to support a seller-paid BAC.

I’d love to hear how these changes are affecting your market. Let’s connect and discuss!